The latest (Q3 2019) LonRes Agent Survey reported that transactions across prime central London (PCL) rose by 14% in the third quarter of 2019 compared with the same period a year ago. Prime London and prime fringe saw activity rise too, up 7% and 6% respectively. This is the first quarter for two years when all three areas recorded an annual increase.
The market below £2m was particularly buoyant, with sales across all three prime catchments up 12% annually. But fewer bought at the top end.
LonRes stated: “It is still unclear whether the chancellor will prioritise Stamp Duty Land Tax in the next budget. What is clear is that the potential for tweaks to stamp duty, first mooted in late June, appear to have impacted buyers at the upper end of the market. The number of homes sold at £5m or more fell 25% in Q3 2019 compared to the same three months a year ago.
“Those who have chosen to purchase are seeking out deals, but price falls are slowing as increased demand impacts on available stock levels. Prices across our three prime catchments fell 2.8% in the third quarter on values achieved in Q3 2018. This compares to price falls of 6.6% in Q1 and 5.1% last quarter.”
In PCL, prices achieved in Q3 2019 were down 5.8% annually, 17% lower than at the 2014 peak and 13% less than those achieved in the three months prior to the EU referendum.
Overseas buyers appear to be returning to the prime markets. According to the LonRes Agent Survey, 60% of agents reported an increase in buyers from Asia, while the number of agents reporting an increase in buyers from the Americas and Middle East far outweighed those reporting a fall.
However, potential buyers are being left disappointed by a lack of stock on the market. Across all three prime areas there were 14% fewer homes on the market at the end of the third quarter compared with the same point in 2018. This was exacerbated by a 12% fall in the number of new instructions annually in the third quarter.
The picture looked rosier in prime central London, where new instructions rose 9%. However, an increase in sales meant that at the quarter end there were still 13% fewer homes listed than there were a year earlier.
In spite of continued political uncertainty, the rise in buyer activity this quarter bodes well for further improvements once the Brexit fog begins to lift. Agents appear to agree, with 72% of those surveyed expecting prices to be the same, or higher, in 12 months’ time. Less than one in five expect fewer transactions in the next year compared to the last.
Lettings market overview
For both existing tenants and prospective buyers the prime lettings market remains a safe haven, says LonRes. Despite an increase in sales in Q3, the lettings market continues to tempt prospective buyers and 62% of respondents reported an increase in the number of prospective buyers switching to the rental market this quarter, compared with just 4% seeing a fall.
But new entrants to the prime rental market may be surprised by the relative lack of available stock and competition for the best properties. Prospective tenants are now facing the tenth consecutive quarterly decrease in new instructions. The number of properties listed to let in the third quarter fell 8% compared with the same period a year ago and was 23% down compared with the number of new instructions listed three years ago. This time last year, 20% of properties listed to let were under offer. This had risen to 32% by the end of Q3 2019.
Demand remains highest for properties below £1,000 per week, with the majority of agents surveyed seeing an increase for homes in this price bracket. This compares to a fall in demand for homes priced at more than £1,000 per week. Smaller flats remain in short supply, with 84% of agents reporting more studio and one-bedroom flats were needed to meet demand.
Competition among prospective tenants for properties has resulted in further rises in achieved rents this quarter. The LonRes Prime Lettings Index recorded a 5.2% increase in rental prices across the whole of London in Q3 2019 compared with the same period a year ago.
The report concluded: “For landlords, rental growth has been welcome news, particularly as many are now counting the cost of changes to taxation on rental income. The LonRes Prime Yields Index saw gross yields rise across all three of our prime catchments to 3.8% in Q3 2019. Increases in achieved rental values alongside lower sales prices meant yields were at their highest level since Q1 2013.”
